Is the star of VW CEO Herbert Diess waning? (Update)
There’s a possibility that the VW Group CEO Herbert Diess will be gently led to the exit. On Monday, Volkswagen announced that COO Ralf Brandstätter (51) will take over as CEO of the Volkswagen brand, starting the 1st of July. Diess will “therefore receive greater leeway for his tasks as Group CEO,” a press release stated.
But there seems to be more behind the scenes. Herbert Diess, until 2014 working for the competitor BMW, also of Austrian origin, was in 2015 solicited by VW patriarch and Austrian Ferdinand Piëch to come to the VW Group.
After the outbreak of Dieselgate, and the demise of the ‘burned’ CEO Winterkorn, the ‘clean’ Diess rose quickly to the top of the group, and tried to steer it away from all the commotion by emphasizing the group’s commitment to electrification.
With a no-nonsense management style and the support of (the then almighty) Piëch, Diess pushed important restructuring and economy measures through, also to recuperate the (ever-increasing) losses on payments for the Dieselgate debacle.
Diess wanted his group to become the king of electrification, and vast sums (up to 50 billion euros) were planned to be invested. In the beginning, Diess also had the support of the unions. In Germany, they are even more important because they usually are involved in the running of the company (called ‘Mitbestimmung’).
But then the first hitch appeared. The VW Group wasn’t ready when the new WLTP emission rules were installed. It caused quite a little chaos within the group and led to the demise of a lot of still interesting models that couldn’t comply with the new rules.
The second half of 2019 had to be the ‘big bang’ for VW. It was launching the eighth version of its all-time success story Golf and, at the same time, the ‘successor of the Golf for the 21st century’, the all-new and fully electric ID.3 would be released.
Both launches had their difficulties. The new Golf has some teething problems, and its new connectivity and multimedia system (supposed to be one of the highlights of the new car) appears to be difficult and illogical to operate.
Even worse, an incredible amount of ID.3 electric cars, already assembled, are accumulating on VW parking grounds because they can’t be delivered. There seems to be a major bug in one of the software systems, but VW remains dead silent about the causes.
Two communication slip-ups
Meanwhile, the unions have become aware that the energy transition within the group could lead to redundancies, as electric cars need fewer people to assemble and to work on them. Their support for Diess’ strategy is waning. His former union ally within the board, Bernd Osterloh, has become his most ardent critic.
Apart from that, there have been some recent slip-ups that have tarnished the VW image again. At a financial round-up for the group in 2019, Diess used the slogan “EBIT Macht Frei”, a direct reminiscence of the slogan at the entrance of the Auschwitz concentration camp “Arbeit Macht Frei”.
Recently an online campaign for the new Golf went wrong, as it was considered highly racist. It was immediately withdrawn, and the responsible person for this communication slip doesn’t work for VW anymore, but the damage was done.
What was considered Diess’ qualities at the beginning, seem to turn now against him? More and more critical voices point the finger at his management style, passing the responsibility for errors always on to his collaborators and losing interest too quickly for his own projects.
To top it all off, Diess complained last week in an internal meeting for hundreds of VW managers about the leaking of confidential information on VW by members of the supervisory board, calling it ‘a crime’.
The members of this board, with a lot of union and political representatives, were furious. Last Monday Diess had to excuse himself, but the damage was, again, done. Until now, Diess preserves the support of the two most important shareholders, the Porsche and Piëch families, but nobody knows for how long.
Additional signs that his time may have come are the refusal by the board of his request to extend his appointment as CEO from 2023 to 2025, motivated as a compensation for the damage he had to undergo in the jurisdictional aftermath of Dieselgate.
Last week, Diess also proposed Porsche chief Oliver Blume as his successor at the helm of the Volkswagen brand. The board chose Brandstätter instead. The ultimate sign? “From now on, Diess is a lame duck,” comments car sector expert Ferdinand Dudenhöffer, director at the Center for Automotive Research.
Who is Brandstätter?
Ralf Brandstätter was born in Braunschweig, not far from VW’s headquarters, and studied industrial techniques. His most important employer by far was Volkswagen. He started at the bottom of the ladder in 1993, during his studies he already had an apprenticeship at the company as a car assembler.
He gained experience as responsible for purchasing, but he also learned a lot about the inner working secrets of the company when he was the secretary of the Board of Directors. In 2015 Brandstätter became a member of the Board and in 2018 COO of the VW brand.
He’s considered as a sort of opposite personality of Diess and, until now, very popular throughout the whole company. That can quickly change now he is at the helm and has undoubtedly to make difficult decisions.
“Volkswagen goes through a governance crisis at a very difficult moment,” concludes Dudenhöffer. “It has to take the electrification turn and at the same time survive the economic (corona) crisis.”